Question

#4.1

One labor market quirk that helps explain why unemployment goes up so much in a recession is that

• wages are flexible upward but "sticky" downward.

• a price floor called a "minimum wage law" exists for the labor market.

• machines could "replace" humans in the labor market.

• firms are "demanders" of labor, rather than suppliers.

#8.1

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.

1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer.

2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve.

3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.

4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.

Which individual(s) would be included in the calculation of the natural unemployment rate?

• George only

• Mollie and Jeanette

• Mollie only

• George and Ricardo

Answer 1

1) Solution: Wages are flexible upward but "sticky" downward

Explanation: Since in the recession the wages are flexible upward however "sticky" downward thus unemployment rises

2) Solution: Mollie and Jeanette

Explanation:

Mollie	frictionally unemployed
George	cyclically unemployed
Jeanette	structurally unemployed
Rricardo	discouraged worker

The natural unemployment rate will include frictionally and structurally unemployed thus Mollie and Jeanette will be included